The European Securities and Markets Authority’s data quality report, which gathered data from the European Markets Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR) reporting regimes, found that the coordinated supervisory actions by ESMA and the National Competent Authorities (NCAs) had ‘significantly enhanced’ data quality in 2021.
Since its start on 13 July 2020, the SFTR reporting regime has shown comparable results to EMIR across all data quality metrics.
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ompared to the previous year, misreporting of valuations under EMIR fell by around 50% across the reporting firms subject to the review, according to the report.
The report attributed the significant improvement in data quality and accessibility to use of .
Despite the progress, the European watchdog said more work was still needed particularly in relation to data reconciliation.
The report showed that less than 10% of reported derivatives were late by the counterparties and over 20% did not receive updated valuation daily, as required by EMIR.
It also noted shortcomings in reconciliation functions, with around 5 million of reconcilable derivatives remaining unpaired.
To rectify some of these issues, ESMA recommended that data quality could be enhanced if counterparties used the same sets well as identifiers for the reported data in their internal risk management processes.
It said achieving this would require timely and complete reporting of regulatory information to the users of TR data,
In addition, accuracy and confidentiality of data had to be reported by counterparties to and stored by TRs.
Counterparties also had to ensure that the data was comprehensive and accurate especially regarding the reporting of valuation and collateral data.
Moreover, consistency was key in the reconciliation of data submitted by the two counterparties of the same derivative/transaction.
“Since the implementation of EMIR and SFTR, there’s certainly signs that financial institutions are adopting a more consolidated approach, as they begin re-evaluating what more can be done with their reference and market data,” says Alexander Dorfmann, Director of Product Management on the financial information side at SIX:
He adds, “Embracing a standardised, more scalable data service which enables firms to extract the reference and pricing information needed for each regulation is an obvious step. The crossover between EMIR and SFTR is a prime case in point. While the same level of detail may not be required, a lot of the data market participants are currently distributing for SFTR is already reflected under EMIR.”
©Markets Media Europe 2022
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